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Eastspring raises $417m for FMP

The Singapore-based asset manager is the latest firm to issue a fixed maturity product for risk-averse, income-hungry retail investors.

“Heightened market volatility drives demand for steady income and certainty in investment outcome. FMPs (fixed maturity products) continue to be in strong demand by investors. In the development of this unique FMP, we recognise the need to provide a differentiated offering with wide appeal,” said Xavier Meyer, head of distribution at Eastspring in a statement.

The FMP was distributed in the private banking sector through Standard Chartered Private Bank in Singapore, Hong Kong, the UK and the Middle East. The offer period for the FMP has now closed, according to a statement from Eastspring.

According to Eastspring, the $193bn Asian investment management arm of Prudential, it has raised $417m for its new fixed maturity product with an early termination feature. It follows FMPs recently launched by the firm in Taiwan and Malaysia.

Fixed maturity products became popular in some Asian countries last year. For Taiwan-domiciled funds, FMPs had the highest net inflows of NT$92bn ($2.99bn) last year, according to data from Morningstar Direct.

Other fund managers have also offered similar products directed at Hong Kong and Singapore private banks, as stock market volatility returned in May after two months of gains. An intensification of the US-China trade dispute gave investors the jitters, and a tentative truce was agreed at the G20 meeting in Osaka a week ago. But there is no clear path to a final resolution.

Meanwhile, the prospect of the US Federal Reserve cutting interest rates over the next 12-t0-18 months has increased since the start of the year, despite economic figures – such as the strong non-farm payroll data on Friday – still indicating a robust domestic economy.

The yield of the 2-year US Treasury note has fallen to 1.18% from 2.5% on 1 January, and the yield curve (the difference between 3-month  and 10-year rates) has been inverted for over a month, as traders anticipate future Fed cuts to prevent a recession or stoke a recovery.

Declining interest rates and volatile stock markets are the obvious conditions for investment managers to devise FMPs. In theory, their short fixed maturity provides price stability and locked-in incremental yield without re-investment risk.

Last month, HSBC Global Asset Management launched a 2.5 year FMP for sale to retail investors in Hong Kong and Singapore. It aims for a 3.5%-4% yield through a portfolio diversified across investment grade and high yield bonds in developed and emerging markets.

BNP Paribas Asset Management said it raised $170m from private banks in Hong Kong and Singapore for a four-year fixed maturity product late last year that offered investors an annual net rate of three-month Libor plus 180 basis points.

In May, Aberdeen Standard Investments told FSA that it also has plans to offer FMPs this year.

Part of the Mark Allen Group.